Coding Errors May Render Receivables Uncollectible

"Double check your coding!," is the harsh lesson to healthcare providers from the recent California Court of Appeal's opinion in YDM Management v. Sharp Community Medical Group.i The Court ruled that the defendant, an independent practice association, was not required to pay a single cent more than it had due to the provider's CPT coding mistakes - costing hundreds of thousands of dollars.

The lesson is deceivingly simple but made all the difference here: ensure precision and accuracy in ascribing coding to invoices. In the case, the court strictly construed the urgent care company's invoices - none of which contained the correct CPT codes to indicate emergency services - as a concession "that it was not claiming that it had provided emergency services." That concession proved damning because providers without a written, verbal, or implied contract are generally compensated based on the plan documents for non-emergency services rendered to PPO and POS enrollees, which tends to be significantly less than the "reasonable and customary value" that such providers are entitled to receive for emergency services.ii

Case Details:

The plaintiff, YDM Management Company, Inc., is not a healthcare provider itself. Instead, it purchases accounts receivables for reimbursement claims to plans from physicians and other providers. In this case, YDM had purchased receivables from Doctors Express, an operator of urgent care facilities in San Diego, California, for services rendered to plan enrollees of defendant Sharp Community Medical Group, Inc.

Sharp, having received Doctors Express' invoices as an out-of-network provider, only paid the limited Evidence of Coverage amount based on the fact that no services were "emergency" among other reasons. Doctors Express then sold the ostensible debt - the difference in the emergency versus non-emergency price - to YDM.

YDM, in turn, sued Sharp claiming that the actual reimbursement payments were "arbitrary, capricious and inexplicable." It alleged the billed amounts from the Doctors Express physicians were all reasonable, customary, and usual, and thus should be paid because the services were rendered under emergency circumstances.

A battle royale ensued with numerous motions and papers being filed at likely great expense. YDM survived the initial stages only to face Sharp's motion for summary judgment. To support its motion, Sharp hired an expert to prepare a simple table of the services listing each CPT (Current Procedural Technology) code - distilling over 20,000 pages of claims submissions down to a 113-page spreadsheet. The expert concluded that none of the codes were defined as "emergency" by the American Medical Associationiii and, therefore, none of the services were provided in an emergency context.

Sharp's tactic greatly simplified what could have proved to be a rather intricate case. The argument was likewise straightforward: Sharp had no obligation to pay any additional money because it had already paid the indisputable "non-emergency" amounts for the billed services, as listed in the plan.

To its credit, YDM fought back and hired its own expert who reviewed all of the 20,000+ pages of claims, all of the CPT codes, and concluded without qualification that each and every service was provided in an emergency context necessary to stabilize the patients. The work was to no avail. The Court rejected the conclusion because the expert had failed to adequately explain how each service was an emergency. YDM was stuck with the provider's coding mistakes - binding it to accept the much lower amount set forth in the plan documents.

Had Doctors' Express coded its invoices to reflect emergency services, YDM could have avoided Sharp's argument entirely and perhaps could have recouped the entire sum.

Takeaways:

This case could have a far reaching impact. Suffice it to say that YDM, and any other buyers in healthcare reimbursement receivables, must now resort to enhanced due diligence in assessing the coding used to describe the billed services or risk similar results in the future. The decision may even depress receivable sale prices.

The impact in reimbursement disputes, both before and during litigation, will surely be seen beyond the emergency context, as payor-side organizations will search for tacit admissions far and wide when looking for rationales to pay less. Unfortunately, coding errors arguably are not limited to the emergency context but could apply whenever the types of services rendered is at issue, such as ascertaining the reasonable and customary values and also contracted amounts.

In sum, providers must be precise and avoid potential admissions by erroneous "under" coding, as seen here, while balancing that effort to continue avoiding the appearance of the more infamous up-coding problem. With rising medical costs and technology supplying ever more sophisticated weapons, the YDM Management v. Sharp Community Medical Group decision only ups the already rising ante in the overarching reimbursement dispute arena.

i The full opinion is available at http://www.courts.ca.gov/opinions/documents/ D071244.PDF. The underlying case was filed in the County of San Diego as Case No. 37-2014-00042397.iiSee California Code of Regulations, title 28, section 1300.71.iiiSharp's expert claimed only the following CPT codes were designated as emergency services: 99281, 99282, 99283, 99284, and 99285.

Adam G. Wentland is an attorney at Theodora Oringher PC who represents a diverse array of clients from some of the largest healthcare provider networks in the country, private and not-for-profit hospitals, medical staffs, independent practice associations, and individual physicians.